You don't want to scare away the candidate, but the alternative is worse; i.e. you either lie or downplay the issues in your organisation. As a potential candid

You don't want to scare away the candidate, but the alternative is worse; i.e. you either lie or downplay the issues in your organisation. As a potential candidate, this tells me you and/or the organisation cannot be trusted. Our first encounter started with you lying. That sets a terrible precedent. You don't need to go into full glorious detail either, but do not lie. Speak honestly about the issues in your organisation and what you're doing about them. Maybe the candidate can even add some value there. If you can't, that says a lot about your organisation. If you can't speak to a candidate about it, maybe you should speak on it internally.